Posts Tagged ‘Ukraine’

The Orange Revolution failed because of corruption and inertia in the economy. What now?

This is, after all, the second popular uprising against Yanukovych, the first being the Orange Revolution of 2004-2005. Although thwarted in his attempt to steal that election, Yanukovych returned to power in 2010, managing to win a fair election after his political adversaries failed to show results while in office.

This is a second chance for the pro-Western parties in Ukraine to deal with the deep-seated malaise of the economy, the pervasive corruption, and all the other ills that afflict this troubled land. They had better do better than last time–and all the while fending off what are sure to be determined attempts at sabotage emanating from Moscow.

He has several suggestions about other sources. I pretty much rely on him as he has been all over and has a good eye.

I spent a week in Ukraine a few years back when I traveled by car from the Polish border through Lviv to Kiev and down to Odessa and Yalta. I wrote about it at length in my book, Where the West Ends. So I feel obligated to write about it now that the capital is on fire.

Kiev is a magnificent city, and it pains me to see it like this, but I should not be surprised. Almost every country I’ve ever written about is either in hell, has only recently recovered from hell, or is on its way to hell. I hoped when I visited Ukraine that it was on its way out, but I did not have a good feeling about it, as you’ll recall if you read my book.

First let’s consider the bad reasons for a breakup—Ukraine’s diversity in general and the regional, ethnic, confessional, and cultural divisions between its “West” and “East” in particular. A good place to start is a recent article by Orlando Figes, professor of history at Birkbeck College, University of London, “Is There One Ukraine?” Figes, who should know better coming from the UK, writes about Ukraine’s divisions as if they were unique and as if diversity alone justified or led to breakup. He’s wrong on both counts. Ukraine’s diversity is pretty much the norm for all stable states everywhere.

What is unusual about contemporary Ukraine is that it’s exploited by a criminal gangster regime—Yanukovych’s— in cahoots with another criminal gangster regime—Putin’s. Many countries have the misfortune of being misruled by homegrown camarillas. Many countries have the misfortune of being dominated by predator states. Ukraine has the double misfortune of being misruled at home and “mis-dominated” abroad.

The president, who has now fled Kiev, is described a a “criminal madman.”

Remove the southeast and Ukraine’s treasury experiences an immediate boon; its demographics, energy consumption, and health improve; and its politics automatically become more democratic and less corrupt.

Although lopping off the Donbas would benefit the rest of Ukraine, Yanukovych’s mafia regime desperately needs Ukraine to be whole. If Luhansk and Donetsk were to split away, their rust-belt economy would collapse without Kyiv’s financial support and the Regionnaires, trapped in their polluted bailiwick, would have nothing to steal. And what would Yanukovych’s multibillionaire pal, Rinat Akhmetov, do without easy access to Ukraine’s resources?

There appears to be no good solution to Ukraine, including partition although that may be what will happen.

The moral for the democrats is simple. If and when they return to power, the democrats should call the Regionnaires’ bluff. Next time the Regionnaires threaten to leave, the democrats should point to the door, and say, “Don’t call us. We’ll call you.”

The same might apply to Quebec.

The Wall Street Journal had a good piece yesterday comparing Ukraine with Georgia 5 years ago.

The West dragged its feet on financial sanctions against the Yanukovych circle, but on Thursday last week a move by the EU—after 77 protesters were shot dead in broad daylight—helped bring down the Ukrainian leader. Fearing for their assets and visas, his cronies quickly dropped him.

and: At every opportunity, Mr. Saakashvili says that Ukraine’s best defense against Russian pressure is a successful move to European-style rule. This is what the revolution was about. “Change must come fast,” he says. “I’m worried about Crimea, but I’m more worried about Kiev. If Kiev goes into protracted political crisis, then everything else will explode.”

If Ukraine starts to go after its oil and gas reserves with fracking, a lot may change.

The Cold war ended with the fall of the USSR in 1991. Boris Yeltsin courageously stopped the KGB apparatchiks from taking back control of the country. Unfortunately, Boris was a drunk with lots of corrupt relatives. His administration was riddled with corruption and it is widely suspected that there was a deal between Yeltsin and Putin to leave Yeltsin alone as long as Putin was given a cloak of legitimacy.

Having surrounded himself with corrupt cronies and financiers, Yeltsin paid only lip service to fighting crime and corruption. He presided over an unprecedented deterioration in Russia’s internal security and law enforcement. The population became disgruntled as bandits ruled the streets and businesses, while businesspeople, foreign and domestic, balked at investing. Taken together, the failures of the post-communist transformation and the inability to construct even a minimal social safety net lowered the already meager standard of living of tens of millions of Russians and helped make Boris Yeltsin as unpopular at the end of his term as Mikhail Gorbachev was at the end of his.

At first, Putin cleaned house.

Thus far, Putin’s political and public relations instincts have been astute. He was filmed giving out hunting knives to Russian officers and troops in the trenches of Chechnya the morning of New Year’s Day, when most Russians were sound asleep after having spent the night toasting the new millennium. He sent Yeltsin’s daughter, Tatyana Diachenko, packing on his first day on the job. The notorious Diachenko not only was her father’s Kremlin advisor, but is also alleged to have spearheaded many of the corrupt financial dealings attributed to the Yeltsin family. He fired Yeltsin’s presidential property manager, Pavel Pavlovich Borodin, who is now being sought by police in Switzerland. He demoted Nikolai Aksenenko, first deputy prime minister in charge of the economic portfolio, to preside over the railways, while elevating a tough debt negotiator, former Finance Minister Mikhail Kasyanov, to the No. 1 economic position. Watching their dynamic new acting president, many Russians quoted their proverb, “a new broom, which sweeps clean.”

However, Putin is not a democrat.

Vladimir Putin will be strongly tempted to revert to the traditional paths of autocracy and statism. As a former intelligence officer and head of the secret police, he has the right profile to emerge as a centralizing, strong leader in the tradition of Peter the Great, or even worse, Nicholas I, the preeminent monarch-policeman of the first part of the nineteenth century. Putin’s entry into the political scene is inescapably connected to the war in Chechnya, which, the critics say, was engineered to launch the “Putin for President” campaign. He may see both the fate of Russia and his rule through the traditional prism of military prowess and conquest.

The Russian population is expected to drop by 700,000 in 2001 and will
total 144.5 million, according to the state statistics committee quoted by
Interfax.

Over the past eight years, Russia’s population has decreased by close to
two percent with 2.8 million fewer people, according to official figures.

Deaths far outpace births by a ratio of 14.7 in 1,000 compared to 8.4.

Only 1.2 million children are born each year in Russia, well below the two
million needed to keep the population at existing levels, said Kulakov.

The second is an unstable economy, dependent on energy exports. Attempts to build a modern, high technology sector is failing, stifled by the authoritarian rule of Putin and the FSB (formerly KGB).

But the big problem for high technology in Russia is neither money nor ideas. It is the country’s all-pervasive bureaucracy, weak legal system and culture of corruption. This may explain why the nanotechnology corporation has so far found only one project to invest in (and that is registered in the Netherlands). The share of high-tech products in Russia’s exports is only 0.6%, “a shameful rate” according to Vladimir Fortov, a member of the Russian Academy of Science. Over the past 15 years, he says, Russia has not brought to the market a single significant drug. The average age of Russia’s scientists is well over 50. One of the main commercial activities of Russian research institutes is leasing or selling their property and land.

Now, Putin seems to be adopting the methods of Stalin, those of armed robbery writ large, as he seeks to control Georgia which has major pipelines and other economic attractions. The crisis has been building for months and exploded this weekend, probably to coincide with the Olympics. The USSR did much the same in the past, invading and crushing Hungary when Britain and France invaded Egypt in 1956. Unfortunately, we allowed a precedent in Kosovo during the breakup of Yugoslavia.

Georgia’s president, Mikheil Saakashvili, said Russia’s ambitions were even more extensive. He declared that Georgia was in a state of war, and said in an interview that Russia was planning to seize ports and an oil pipeline and to overthrow his government.

That is so much cheaper than actually building them. The oil price rise the past year has given Russia a huge boost in its cash flow but that may not be a long term solution to Putin’s problems. He may have decided to punish the west for its support of Georgia by interrupting the pipelines that pass through Georgia and precipitate a crisis in Europe. That would frighten Europe but would it solve his problems ?

Oil and gas have been the foundation of the regime of Vladimir Putin, Russia’s outgoing president, and are also a preoccupation of his successor, Dmitry Medvedev, who was chairman of Gazprom, the state-controlled gas giant. The flow of petrodollars has created a sense of stability, masked economic woes and given Russia more clout on the world stage. Yet the malaise afflicting its most important industry is almost entirely man-made. “Geologically, there is no problem,” says Anisa Redman, an analyst at HSBC, a bank.

In principle, Russia’s bonanza could continue for years: it has the world’s seventh-biggest oil reserves, at 80 billion barrels, according to BP, a British oil firm. And oilmen reckon there are 100 billion more barrels to find—“the biggest exploration prize in the world”, in the words of Robert Dudley, the boss of TNK-BP, BP’s Russian joint venture. But Russia has regulated the industry so poorly that production is falling despite the soaring oil price.

“Tax is the major impediment,” says Ms Redman. The government levies an export duty of 65% at prices over $25 a barrel. Add to that various corporate, payroll and production taxes, oilmen complain, and the state creams off as much as 92% of profits. Executives at TNK-BP have argued that rising costs across the oil industry will make many investments in Russia unprofitable unless the tax regime is changed. As it is, TNK-BP accounts for a fifth of BP’s production, but only a tenth of its profits.

The Russians still do not understand economics and that ignorance may be costly for everybody. In the meantime, it emphasizes the risks of a callow youth like Obama as president. McCain has been to Georgia multiple times and knows the people involved. He has never bought the line that Putin is a modern statesman. Obama supporters, as is so often the case, blame America and America’s friends for Russia’s actions. Those 1500 people killed thus far were “inconvenient.”

Administration officials have regularly cautioned Mr. Saakashvili to be patient on Abkhazia and South Ossetia, even as they have given private and public reassurances about NATO membership. It would, in fact, be surprising if Georgia had consciously provoked a war in South Ossetia, since Mr. Saakashvili understands that doing so would almost certainly put an end to the NATO bid; indeed, Russia may well calculate that NATO will continue to exclude Georgia so long as the country is embroiled in hostilities along its border.

Georgia’s predicament seems very simple from the vantage point of Tbilisi — 1921, 1938 — but extremely complicated from a great remove. Russia threatens Georgia, but Georgia threatens Abkhazia and South Ossetia. Russia looks like a crocodile to Georgia, but Georgia looks to Russia like the cats’ paw of the West. One party has all the hard power it could want, the other all the soft. And now, while the world was looking elsewhere, the frozen conflict between them has thawed and cracked. It will take a great deal of care and attention even to put things back to where they were before.